Chapter 01 - The Study of Business, Government, and Society
Chapter 01
The Study of Business, Government, and Society
True / False Questions
1.The business-government-society (BGS) field is the study of this environment and its importance for managers.
TrueFalse
2.The primary purpose of a business is to make a profit by providing products that satisfy human needs.
TrueFalse
3.The structures and processes in a society that make and apply policies and rules are called businesses.
TrueFalse
4.An enduring belief about which basic choices in a society are "correct" is called an idea.
TrueFalse
5.Institutions are formal patterns of relations that link people together to accomplish a goal.
TrueFalse
6.A business uses society's resources to create new wealth.
TrueFalse
7.The public generally believes that a business has social responsibilities beyond merely making a profit.
TrueFalse
8.The broad duties of a business that are needed to obtain the support of society are called its social contract.
TrueFalse
9.In the market capitalism model, the "market" acts as a buffer between business and nonmarket forces.
TrueFalse
10.The dominance model represents business primarily based on the economic forces that affect it.
TrueFalse
11.The dominance model states that corporations act primarily for the good of most of the people in the society.
TrueFalse
12.The dominance model believes that society is undemocratic in its operations.
TrueFalse
13.The countervailing forces model states that society is governed primarily by economic forces.
TrueFalse
14.The countervailing forces model accepts the absolute primacy of business as in the dominance model.
TrueFalse
15.The countervailing forces model is essentially the same as the market capitalism model.
TrueFalse
16.The stakeholder model states that the immediate priority of a corporation is to benefit its investors.
TrueFalse
17.Governments are secondary stakeholders to corporations.
TrueFalse
18.A concern with the stakeholder theory is that it is not always clear who or what a legitimate stakeholder is.
TrueFalse
19.Theories simplify and organize areas of knowledge by describing patterns or regularities in the subject matter.
TrueFalse
20.In addition to unprecedented wealth creation and new material comforts, capitalism also brings in risks of economic shocks.
TrueFalse
Multiple Choice Questions
21.A profit-making activity that provides products and services that are intended to satisfy human needs is called a(n) ______.
A.business
B.NGO
C.government
D.society
22.The structures and processes in a society that authoritatively make and apply policies and rules are called ______.
A.ideas
B.ideologies
C.governments
D.institutions
23.The network of human relations that consists of ideas, institutions, and material things is a(n) ______.
A.ideology
B.society
C.theory
D.government
24.An enduring belief about which fundamental choices in personal and social life are "correct" is a(n) ______.
A.value
B.institution
C.function
D.process
25.A set of values that create a specific view of the world is a(n) ______
A.institution
B.ideology
C.society
D.economy
26.A formal pattern of relations that link people together in order to accomplish a goal is a(n) ______.
A.society
B.idea
C.institution
D.ideology
27.Which of the following statements is true about ideologies?
A.All ideologies have the power to organize collective activity.
B.Ideologies are structures and processes that authoritatively make and apply policies and rules.
C.Ideologies are essential to coordinate the work of individuals who have no direct relationship with each other.
D.Secular and sacred ideologies are distinct from one another and rarely overlap.
28.The tangible artifacts of a society that shape and are shaped by ideas and institutions are called ______.
A.material things
B.markets
C.customs
D.services
29.The basic agreement between a business and its society that defines the broad duties of the business that are needed to retain the support of society is called a(n) ______.
A.social contract
B.ideology
C.institution
D.scheme
30.Which of the following statements about social contracts is true?
A.Businesses are not obligated to fulfill social contracts.
B.It codifies the expectations of business from society and other stakeholders.
C.It is as clear-cut as the economic forces a business faces.
D.It is partly expressed in law, but also resides completely in social values.
31.Which of the following models describes business as responding primarily to economic forces in society?
A.The market capitalism model
B.The stakeholder model
C.The dominance model
D.The countervailing forces model
32.In the _____ model, the _____ acts as a buffer between business and non-market forces.
A.stakeholder; market
B.countervailing forces; government
C.dominance; management
D.market capitalism; market
33.A _____ emerges when people move beyond subsistence production to production for trade, and markets take on a more central role.
A.centrally planned economy
B.welfare economy
C.market economy
D.socialist economy
34.Which of the following is NOT one of the basic BGS models?
A.The market capitalism model
B.The dominance model
C.The collective business model
D.The stakeholder model
35.Who wrote "The Wealth of Nations"?
A.Karl Marx
B.Émile Durkheim
C.Adam Smith
D.Max Weber
36._____ is an economic ideology with a bundle of values including private ownership of means of production, the profit motive, free competition, and limited government restraint in markets.
A.Capitalism
B.Socialism
C.Communism
D.Democracy
37.Which of the following was an observation made by Adam Smith?
A.Corporations are insulated from pressures holding them responsible.
B.The desire to trade for mutual advantage lies deep in human instinct.
C.Common people who feel disadvantaged in some way seek to take power from the ruling elite.
D.To maintain broad public support, business must adjust to social, political, and economic forces.
38.______refers to a market economy in which the dominant businesses are large firms run by salaried managers, not smaller firms run by owner-entrepreneurs.
A.Socialism
B.Managerial capitalism
C.Marxism
D.Egalitarianism
39.Which of the following is an assumption of the market capitalism model?
A.Government intervention in economic life is significant.
B.Individuals can own private property and freely risk investments.
C.Consumers have limited knowledge about products and prices.
D.Limited information prevents individuals from making completely rational decisions.
40.Which of the following statements about the laissez-faire concept is true?
A.It stands for the belief that government intervention in the market is desirable.
B.It lessens the efficiency with which free enterprise operates to benefit consumers.
C.It is necessary because market forces are benevolent.
D.It opines that businesses are responsible for correcting social problems.
41.The perspective of the market capitalism model leads to the conclusion that:
A.government regulation should be limited.
B.it is the responsibility of businesses to correct social problems.
C.businesses can get away with inferior quality goods and higher profits.
D.the ethical duty of management is to promote the interests of all stakeholders.
42.The economic philosophy that rejects government intervention in markets is called __.
A.socialism
B.laissez-faire
C.communism
D.totalitarianism
43._____ believed that owners of capital exploited workers and promoted systems of rising inequality.
A.Karl Marx
B.Vladimir Lenin
C.Bernard Mandeville
D.Adam Smith
44.In which of the following models do business and government govern the great mass of people?
A.The countervailing forces model
B.The stakeholder model
C.The market capitalism model
D.The dominance model
45.Proponents of the dominance model:
A.focus on the defects and inefficiencies of capitalism.
B.believe that corporations are exposed to societal pressures holding them responsible.
C.believe that market forces are adequate to ensure ethical management.
D.emphasize that businesses and governments are dominated by the masses.
46.The _____ model believes that it is undemocratic for corporations and the powerful elite to control a system that enriches a few at the expense of many.
A.dominance
B.market capitalism
C.stakeholder
D.countervailing forces
47._____ is a recurrent spectacle in which common people who feel oppressed or disadvantaged in some way seek to take power from ruling elite that thwarts fulfillment of the collective welfare.
A.Populism
B.Collectivism
C.Laissez-faire
D.Capitalism
48._____ is an ideology which says that workers should revolt against property-owning capitalists who exploit them, replacing economic and political domination with more equal and democratic socialist institutions.
A.Populism
B.Marxism
C.Laissez-faire
D.Global corporatism
49.Which of the following models suggests that there is an exchange of power among the multiple elements in society and does not attribute constant dominance to any one element?
A.The countervailing forces model
B.The stakeholder model
C.The market capitalism model
D.The dominance model
50.Which of the following statements about the countervailing forces model is true?
A.It represents primarily the perspective of business critics.
B.It reflects the BGS relationship in Western industrialized nations.
C.It stands for the belief that government intervention in the market is undesirable.
D.It assumes that individuals can own private property and freely risk investments.
51.The countervailing forces model differs from the dominance model in that it:
A.advocates opening businesses directly to influence nonmarket forces.
B.rejects the absolute primacy of business.
C.opposes industrial capitalism.
D.fears both physical and moral decline in workers.
52.A conclusion that can be drawn from the _____ model is that business is deeply integrated into an open society and must respond to multiple economic and noneconomic factors.
A.dominance
B.market capitalism
C.stakeholder
D.countervailing forces
53.Which of the following is an example of a secondary stakeholder in a corporation?
A.Customers
B.Unions
C.Employees
D.Stockholders
54.Which of the following is an example of a primary stakeholder in a corporation?
A.Media
B.Government
C.Trade associations
D.Political parties
55.The entities that have a relationship with a corporation such that they are affected immediately and powerfully by the actions of the corporation are called __.
A.primary stakeholders
B.activist groups
C.secondary stakeholders
D.trade associations
56.Which of the following statements about the stakeholder model is true?
A.It reorders the priorities of management away from those in the market capitalism model.
B.Exponents of this model agree on how to identify a stakeholder.
C.It makes a realistic assessment of power relationships between the corporation and other entities.
D.It sets up clear guidelines to measure profit.
57.The _____ model is intended to revitalize capitalism with a new conceptualization of how the corporation should work. This theory rejects the shareholder-centered view of the firm.
A.dominance
B.market capitalism
C.stakeholder
D.countervailing forces
58.Critics of the stakeholder model argue that it:
A.creates prosperity at the cost of rising inequality.
B.primarily represents the perspective of the business and government.
C.seeks to give power to the powerless by replacing force with ethical duty.
D.has received little support from leading global organizations.
59.A critique of the _____ model is that creating surplus ethical sensitivity that soars above legal duty is impractical and unnecessary.
A.countervailing forces
B.stakeholder
C.market capitalism
D.dominance
60.Which of the following is a criticism of the stakeholder model?
A.It does not account for changes that take place in the ideas and processes of society.
B.It generally reflects a way of looking at the BGS relationship Western nations.
C.There is no single, clear, and objective measure to evaluate the combined ethical/economic performance of a firm.
D.It has a negative impact on a corporation's wealth-creating function.
61.Despite its shortcomings, a compelling argument in favor of the stakeholder model is that:
A.it isolates business from the broader society and defines the duties of a business as one of profit making.
B.it has distinguished proponents like Adam Smith and Karl Marx.
C.it clearly distinguishes between primary and secondary stakeholders making it easier for a corporation to satisfy each of them.
D.it is the ethical way to manage because stakeholders have moral rights that grow from the way powerful corporations affect them.
62.____ refers to actions taken by managers to adapt a company to changes in its market and sociopolitical environments.
A.Organizational development
B.Strategic management
C.Social activism
D.Value migration
63.All of the following statements are true about theories EXCEPT that:
A.they simplify and organize areas of knowledge.
B.they integrate entire fields of knowledge.
C.they are statements or visions that create insight.
D.they are important in every field.
64._____ is a statement or vision that creates insight by describing patterns or relationships in a diffuse subject matter.
A.idea
B.value
C.theory
D.postulate
65.The study of phenomena that move through time is called __.
A.history
B.ideology
C.time slip
D.horology
Short Answer Questions
66.Define "business".
67.What is meant by "managerial capitalism"?
68.What is Marxism?
69.Define the term "stakeholders".
70.What is strategic management?
Essay Questions
71.What is a society? Discuss its elements.
72.Discuss how institutions support markets.
73.Discuss the importance of the BGS field.
74.Discuss the market capitalism model and explain how it differs from the dominance model.
75.Describe the dominance model.
76.What is the countervailing forces model in the BGS relationship?
77.What conclusions can be drawn from the countervailing forces model in the BGS relationship?
78.Discuss the stakeholder model of the BGS relationship.
79.What is the difference between primary and secondary stakeholders? Give examples.
80.Discuss the arguments against the stakeholder model.
Chapter 01 The Study of Business, Government, and Society Answer Key
True / False Questions
1.(p.4)The business-government-society (BGS) field is the study of this environment and its importance for managers.
TRUE
Difficulty: Easy
2.(p.4)The primary purpose of a business is to make a profit by providing products that satisfy human needs.
TRUE
Difficulty: Easy
3.(p.5)The structures and processes in a society that make and apply policies and rules are called businesses.
FALSE
Difficulty: Easy
4.(p.5)An enduring belief about which basic choices in a society are "correct" is called an idea.
FALSE
Difficulty: Easy
5.(p.5)Institutions are formal patterns of relations that link people together to accomplish a goal.
TRUE
Difficulty: Easy
6.(p.6)A business uses society's resources to create new wealth.
TRUE
Difficulty: Easy
7.(p.8)The public generally believes that a business has social responsibilities beyond merely making a profit.
TRUE
Difficulty: Easy
8.(p.8)The broad duties of a business that are needed to obtain the support of society are called its social contract.
TRUE
Difficulty: Easy
9.(p.9)In the market capitalism model, the "market" acts as a buffer between business and nonmarket forces.
TRUE
Difficulty: Easy
10.(p.12)The dominance model represents business primarily based on the economic forces that affect it.
FALSE
Difficulty: Easy
11.(p.13)The dominance model states that corporations act primarily for the good of most of the people in the society.
FALSE
Difficulty: Easy
12.(p.13)The dominance model believes that society is undemocratic in its operations.
TRUE
Difficulty: Easy
13.(p.15)The countervailing forces model states that society is governed primarily by economic forces.
FALSE
Difficulty: Easy
14.(p.15-16)The countervailing forces model accepts the absolute primacy of business as in the dominance model.
FALSE
Difficulty: Easy
15.(p.16)The countervailing forces model is essentially the same as the market capitalism model.
FALSE
Difficulty: Easy
16.(p.16)The stakeholder model states that the immediate priority of a corporation is to benefit its investors.
FALSE
Difficulty: Easy
17.(p.17)Governments are secondary stakeholders to corporations.
FALSE
Difficulty: Easy
18.(p.19)A concern with the stakeholder theory is that it is not always clear who or what a legitimate stakeholder is.
TRUE
Difficulty: Easy
19.(p.20)Theories simplify and organize areas of knowledge by describing patterns or regularities in the subject matter.
TRUE
Difficulty: Easy
20.(p.21)In addition to unprecedented wealth creation and new material comforts, capitalism also brings in risks of economic shocks.
TRUE
Difficulty: Easy
Multiple Choice Questions
21.(p.4)A profit-making activity that provides products and services that are intended to satisfy human needs is called a(n) ______.
A.business
B.NGO
C.government
D.society
Difficulty: Medium
22.(p.5)The structures and processes in a society that authoritatively make and apply policies and rules are called ______.
A.ideas
B.ideologies
C.governments
D.institutions
Difficulty: Easy
23.(p.5)The network of human relations that consists of ideas, institutions, and material things is a(n) ______.
A.ideology
B.society
C.theory
D.government
Difficulty: Medium
24.(p.5)An enduring belief about which fundamental choices in personal and social life are "correct" is a(n) ______.
A.value
B.institution
C.function
D.process
Difficulty: Medium
25.(p.5)A set of values that create a specific view of the world is a(n) ______
A.institution
B.ideology
C.society
D.economy
Difficulty: Medium
26.(p.5)A formal pattern of relations that link people together in order to accomplish a goal is a(n) ______.
A.society
B.idea
C.institution
D.ideology
Difficulty: Medium
27.(p.5)Which of the following statements is true about ideologies?
A.All ideologies have the power to organize collective activity.
B.Ideologies are structures and processes that authoritatively make and apply policies and rules.
C.Ideologies are essential to coordinate the work of individuals who have no direct relationship with each other.
D.Secular and sacred ideologies are distinct from one another and rarely overlap.
Difficulty: Medium
28.(p.7)The tangible artifacts of a society that shape and are shaped by ideas and institutions are called ______.
A.material things
B.markets
C.customs
D.services
Difficulty: Medium
29.(p.8)The basic agreement between a business and its society that defines the broad duties of the business that are needed to retain the support of society is called a(n) ______.
A.social contract
B.ideology
C.institution
D.scheme
Difficulty: Medium
30.(p.8)Which of the following statements about social contracts is true?
A.Businesses are not obligated to fulfill social contracts.
B.It codifies the expectations of business from society and other stakeholders.
C.It is as clear-cut as the economic forces a business faces.
D.It is partly expressed in law, but also resides completely in social values.
Difficulty: Medium
31.(p.9)Which of the following models describes business as responding primarily to economic forces in society?
A.The market capitalism model
B.The stakeholder model
C.The dominance model
D.The countervailing forces model